DCAL: Management of Major Capital Projects

The Comptroller and Auditor General, Kieran Donnelly, today publishes a report on the management of major capital projects in the Department of Culture, Arts and Leisure (the Department).  As part of the 2008-11 Programme for Government, the Department had a target to deliver £229 million capital investment in the Northern Ireland culture, arts and leisure infrastructure.  This unprecedented level of investment by the Department resulted in delivery of a number of major capital projects .  The report examines how seven of these projects  performed against time and cost targets:

Ulster Museum, Lyric Theatre, Metropolitan Arts Centre, Public Record Office of Northern Ireland,  Crescent Arts Centre and Tollymore National Outdoor Centre

Mr Donnelly said: “It is pleasing that all of the projects have delivered the expected assets and that a number of the projects have been highly commended and have received prestigious awards.  However it is disappointing that most of the construction work did not go according to plan, with delays and cost overruns which resulted in all seven projects needing additional funding.

Going forward, the Department has a capital budget of £158 million (including £110 million for Stadia) for the period 2011-15.  It is vitally important, therefore, that the Department ensures that effective measures have been put in place to reduce the likelihood of similar problems in the future.”

One of the major capital projects reviewed as part of the report was the re-build of the Lyric Theatre.   The unavailability of basic tender documentation meant that it was not possible to provide assurance that the award of the contract worth £10.9 million was in line with best practice.   Mr Donnelly commented: “On the basis of the limited information available on this project we must conclude that there was no scrutiny of the tender process by the Department or its agents.  Greater care needs to be taken to ensure that probity is maintained in the contracting process and that decisions are well documented and able to be audited.”

Main Findings

Cost and time overruns

The combined final cost of the seven projects was £103.4 million, £24.8 million (31%) more than the £78.6 million estimated in the original business cases.  The cost increase on individual capital projects ranged from 3.2% (Public Record Office of Northern Ireland) to as much as 91.3% (Metropolitan Arts Centre).

Project cost estimates are critical reference points to objectively assess the performance of a project.  Inaccurate cost estimates at this stage undermine effective appraisal and value for money.  Late increases in costs can dilute the impact of the approval process as once a project has started it is harder to take the decision to withhold or cap support.

Most of the projects took at least four years to progress from initial approval to completion.  When actual final completion times were compared with the estimates in the original business cases, six of the seven projects experienced delays ranging from seven months to two and a half years.  The business case for the Lyric Theatre provided no indication of an estimated completion date.

The report calls for attention to be focussed on three key areas identified as the source of cost and time overruns:

  • Changes to scope and specification of the project outlined in the original business case
  • Construction cost inflation exacerbated by delays in project delivery
  • Unclear project scope, objectives and benefits resulting in time and cost estimates that were not robust

The Lyric Theatre

During our review of the Lyric Theatre project a number of concerns were raised in relation to:

  • Adjustments made to tendered prices
  • Unavailable tender documentation
  • Absence of a representative of government at tender evaluation
  • Perceived conflicts of interest

Notes for Editors

  • The Comptroller and Auditor General is Head of the Northern Ireland Audit Office (the Audit Office). He and the NIAO are totally independent of Government. He certifies the accounts of Government Departments and a range of other public sector bodies. He has statutory authority to report to the Assembly on the economy, efficiency and effectiveness with which departments and public bodies use their resources.
  • Background briefing can be obtained from the Audit Office by contacting Sean McKay (028 9025 1075) or Suzanne Walsh (028 9025 1035).